Panic of 1819

The Panic of 1819 was the first major financial crisis in the United States, and occurred during the political calm of the Era of Good Feelings. The new nation previously had faced a depression in the late 1780s, following the war of independence, which had led directly to the establishment of the dollar and, perhaps indirectly, to the calls for a Constitutional Convention. It had also experienced another severe economic downturn in the late 1790s, following the Panic of 1797. In the earlier crisis however, the primary cause of economic turmoil originated in foreign trade and the broader Atlantic economy. These crises and others had resulted from international conflicts such as the Embargo Act of 1807 and the War of 1812, and had caused widespread domestic foreclosures, bank failures, unemployment, and a slump in agriculture and manufacturing. However, things would change for the US economy after the Second Bank of the United States was founded in 1816, in response to the spread of banknotes issued by private banks, due to inflation brought on by the debt following the war. In contrast, the causes of the Panic of 1819 largely originated within the U.S. economy. The panic marked the end of the economic expansion that had followed the war and ushered in new financial policies that would shape economic development.